“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Regions Financial Corp (NYSE: RF)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.
| Start date: | 12/06/2002 |
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| End date: | 12/05/2022 | ||||
| Start price/share: | $27.24 | ||||
| End price/share: | $21.98 | ||||
| Starting shares: | 367.11 | ||||
| Ending shares: | 674.54 | ||||
| Dividends reinvested/share: | $12.30 | ||||
| Total return: | 48.26% | ||||
| Average annual return: | 1.99% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,833.57 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 1.99%. This would have turned a $10K investment made 20 years ago into $14,833.57 today (as of 12/05/2022). On a total return basis, that’s a result of 48.26% (something to think about: how might RF shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Regions Financial Corp paid investors a total of $12.30/share in dividends over the 20 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .8/share, we calculate that RF has a current yield of approximately 3.64%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $27.24/share purchase price. This works out to a yield on cost of 13.36%.
One more piece of investment wisdom to leave you with:
“The most important thing about an investment philosophy is that you have one.” — David Booth
